EDITOR'S LETTERMerryn Somerset Webb
Snap up some gold miners
It’s been a rubbish start to the year for most investors. The S&P 500 had its worst week on record last week; the FTSE is down over 5% and the Shanghai Composite fell another 10% last week. Everyone’s getting nervous – to see just how nervous, read in this week’s issue about the RBS analyst who reckons you should be selling “almost everything” immediately.
MoneyWeek readers will be a little less hysterical than most. We’ve been warning of overvaluation across many markets and suggesting you hold more cash than usual for some time. And when we have suggested investing (in China, for example) we have been very clear that it should be for the long term. No house deposits in the stockmarket please. We also know that however bad things are, there is always something that looks cheap.
What is it right now? I had dinner with one of our favourite analysts, Chris Wood of CLSA, earlier this week and asked him that very question. We had just finished a rather gloomy conversation about the uselessness of monetary policy, the dangers of a ban on cash and the miseries of the London housing market, so I wasn’t expecting a particularly enthusiastic response. But I got one.
Gold miners, he said. This makes sense to us. Gold miners have, as a sector, fallen about as far as anything ever does (just over 70%). That’s the kind of fall that often marks a bottom.
• Read the full editor’s letter here: Snap up some gold miners